People who pay $99 a year for Prime can listen to tens of thousands of albums from artists including Beyonce, The Lumineers and Macklemore & Ryan Lewis for no extra cost. By adding music, Amazon is hoping to hook new customers and retain existing ones on its Prime free-shipping plan, which also allows subscribers to watch streams of movies and TV shows and gives Kindle owners a library of books they can borrow once a month.
Steve Boom, Amazon's vice president of digital music, said the service will pay for itself and isn't part of the reason why the company raised the price of Prime from $79 in March — a move Amazon said would cover higher shipping costs. Instead, the company will benefit because Prime members tend to buy more from Amazon and remain loyal customers.
The deal comes on the heels of Apple's announcement that it is purchasing headphone and music-streaming company Beats for $3 billion and is a further acknowledgement of the rise in popularity of streaming and the decline of digital downloads. U.S. sales of downloaded songs slipped 1 percent last year to $2.8 billion while streaming music revenue surged 39 percent to $1.4 billion, according to the Recording Industry Association of America.
Seattle-based Amazon reached licensing deals with most of the top independent labels and major recording companies Sony and Warner Music, but failed to reach a deal with top-ranked Universal Music Group.
That means that while the service will feature artists like Justin Timberlake, Bruno Mars, Bruce Springsteen, Pink and Madonna — it will lack music by Universal stars such as Katy Perry, Taylor Swift and Jay-Z.
The service also won't have many new releases — and for major artists that could mean music that has been released within the last six months.
Universal didn't reach a deal with Amazon because it disagreed with the value of the lump sum royalty payment for the albums in question, according to two people familiar with the matter.